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The New Climate Law Wants to Turn America Into the World’s Factory

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President Biden’s landmark legislation rests on a huge bet: For America to go green, it needs to build more mines, more refineries, and more manufacturing.
On Tuesday, President Joe Biden signed the Inflation Reduction Act into law. It is no exaggeration to say that his signature immediately severed the history of climate change in America into two eras. Before the IRA, climate campaigners spent decades trying and failing to get a climate bill through the Senate. After it, the federal government will spend $374 billion on clean energy and climate resilience over the next 10 years. The bill is estimated to reduce the country’s greenhouse-gas emissions by about 40 percent below their all-time high, getting the country two-thirds of the way to meeting its 2030 goal under the Paris Agreement.
Since the law emerged from a surprise compromise between Senator Joe Manchin and Senate Majority Leader Chuck Schumer last month, most attention has been paid to the fact of the bill itself: that it is a climate bill, that America’s sorry environmental record has begun to reverse. Far less attention has been paid to the ideas that animate the IRA. That is a shame. Every law embodies a particular hypothesis about how the world works, a hope that if you pull on levers A and B, then outcomes C and D will result. Yet even by the standards of landmark legislation, the IRA makes a particularly interesting and all-encompassing wager—a bet relevant to anyone who plans to buy or sell something in the U.S. in the next decade, or who plans to trade with an American company, or who relies on American military power. And although not a single Republican voted for the IRA, its wager is not especially partisan or even ideological.
The idea is this: The era of passive, hands-off government is over. The laws embrace an approach to governing the economy that scholars call “industrial policy,” a catch-all name for a wide array of tools and tactics that all assume the government can help new domestic industries get started, grow, and reach massive scale. If “this country used to make things,” as the saying goes, and if it wants to make things again, then the government needs to help it. And if the country believes that certain industries bestow a strategic advantage, then it needs to protect them against foreign interference.
The approach is at the core of how the IRA seeks to resolve climate change. Democrats hope to create an economy where the government doesn’t just help Americans buy green technologies; it also helps nurture the industries that produce that technology.
This reflects a homecoming of sorts for the United States. From its founding to the 1970s, the country had an economic doctrine that was defined by its pragmatism and the willingness of its government to find new areas of growth. “Yes, there was an ‘invisible hand,’” Stephen Cohen and Brad DeLong write in their history of the topic, Concrete Economics. “But the invisible hand was repeatedly lifted at the elbow by the government, and placed in a new position from where it could go on to perform its magic.” That pragmatism faded in the 1980s, when industrial policy became scorned as one more instance of Big Government coming in to pick so-called winners and losers.
The IRA is not the only bill intent on bringing back industrial policy. The two other large bills passed by this Congress—the $1 trillion bipartisan infrastructure law and the CHIPS and Science Act—make down payments on the future as well; both laws, notably, were passed by bipartisan majorities. They alone would be notable commitments to a different vision of the next decade. But it is in the IRA that these general commitments become specific, and therefore transformative.
Fifty-eight feet above the floor of the Capitol Rotunda is a painting, meant to look like a marble inscription, that tells the story of the country’s history as it seemed in the late 1870s, when it was first painted. But Congress couldn’t decide how that story ended, and the last few scenes sat unfinished for decades. Finally, in 1951, lawmakers set upon a final image that seemed to cap the country’s history: the Wright brothers assembling the first airplane.
Aviation is a good way to think about how industries are born, grow, and become major forces in the economy. Long before they got off the ground, the Wright brothers had spent several years researching key concepts in flight at their bike shop in Dayton, Ohio. Finally, in late 1903, they built a plane at a base camp in North Carolina, and on December 17, Orville Wright rode it into the air, completing the first heavier-than-air flight in human history.
And that’s where the grade-school account of aviation stops. In one miraculous moment, a human being leapt into the air; today, we have Top Gun, FedEx, and Spirit Airlines. Yet the one flight near Kitty Hawk is not actually the end of the story. Although the Wright flier proved that heavier-than-air flight was possible, it was only one piece of machinery. To manufacture multiple aircraft, the brothers opened the Wright Company Factory, the world’s first airplane factory, in Dayton in 1909. In Kitty Hawk, flight became a scientific fact, but six years later, in Dayton, it became an industry.
And that is something closer to how technology actually develops. First, you have research and development, where important ideas are tested and proved on a small scale. Second, you have a prototype, such as that first Wright flier, that translates the ideas into a real technology. Third, you have early commercialization: Engineers and assembly-line workers must learn how to produce multiple copies of that technology, must ensure that the first version wasn’t a fluke, and, perhaps most important, must find people and companies who will serve as their first customers. This is the core work that the Wrights did in their Dayton factory. Only after completing all three steps do you begin to approach something like the enormous Boeing factory outside Seattle today, where 747s are made.
For too long, this story about technological development has focused almost exclusively on steps one and two. We have heard about the brilliant founders in a garage who changed the world with their ideas, but not about the factories where those ideas turned into silicon and plastic. Federal policy has reflected that: Since the 1980s, when Congress has wanted to spur technological progress, it has usually thrown money exclusively at R&D. We have had a science policy, not an industrial policy.
Until this year, that is, when Congress started passing industrial policy right and left. Why the change? Part of it, surely, is that in a post-Trump world, no party really champions globalized free markets anymore.

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